Greencore Group PLC's (LSE:GNC) takeover of Bakkavor Group PLC (LSE:BAKK) could be held back due to too much (or maybe not enough) sauce, according to the UK Competition and Markets Authority.
Announcing the conclusion of its Phase 1 decision on the merger of the two supermarket convenience food suppliers, the competition watchdog warned that the merger will be referred for an in-depth Phase 2 investigation unless the companies offer an acceptable solution to its concerns.
This boiled down to a single issue: the "realistic prospect of a substantial lessening of competition in the supply of own-label chilled sauce".
Greencore, which is taking over slightly smaller Bakkavor, has until next Monday, 3 November, to come up with a way of resolving this concern.
To find possible areas where there may be competition concerns, the CMA examined products which both firms offer, namely supermarket own-label Italian chilled ready meals, own-label salads and own-label chilled sauces.
Markets for both Italian ready meals and salads were seen as sufficiently competitive.
But for chilled sauces, the merger would create one of the largest suppliers in a market where remaining competitors are weak and there is little evidence of new entry or expansion.